a second consecutive quarter. This comes after five years of declines, which IBM ended with a streak of three quarters of growth.
In the quarter IBM paid $34 billion to acquire Red Hat, announced a chip manufacturing deal from Samsung and sold software assets to HCL Technologies for $1.8 billion. The Red Hat deal is expected to close in the second half of 2019.
“The deal propels IBM as a leading cloud provider and significantly improves its competitive positioning relative to Amazon, Microsoft and Google …. However, based on conversations we have had with investors, the concern has been around the ability for the combined entity to retain Red Hat employees and that IBM may have overpaid at 32x EV/FCF (CY19) for the assets despite the acquisition’s transformational potential,” KeyBanc Capital Markets analyst Arvind Ramnani wrote in a note distributed to clients on Thursday.
With respect to guidance, analysts expect IBM to forecast $13.79 in earnings per share, excluding certain items, for all of 2019, according to Refinitiv.
“We believe the ongoing growth of the Strategic Imperatives unit will return IBM to organic growth in 2019 despite … currency headwinds,” Nomura Instinet analysts led by Jeffrey Kvaal wrote in a Jan. 15 note.
IBM stock is up 7 percent since the beginning of the year.
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